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How I’m Positioning Client Portfolios Now

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Two weeks ago, I was white water rafting in Tennessee on Class III and IV rapids. Last week it was the stock market that was gyrating. Fortunately, in May I adjusted my clients’ portfolios and I’d like to share the results with you in this post. 

First, I parsed my book into four categories as I wrote about a few weeks ago. The categories are: Auto-pilot (<$25k); Auto-Pilot+ ($25-$100k); Model Portfolios ($100-$500k); and Custom Models (>$500k). 

During the past several days, I’ve received a few calls from clients asking how their accounts were holding up. I had moved most of the accounts into the Low Volatility model in May. From June 30th until Friday morning, August 5th, the Dow was off 8.30%. This period includes the 512-point decline on August 4th. The Low Volatility portfolio was down 0.70% over the same period. The Auto-Pilot category was off 2.52% and the Auto-Pilot+ was down around 2.00%. The customized models were down 1-2%. All in all, I’m pleased with the results. Let’s drill down a bit and discuss the Low Volatility portfolio.

To me, the key in portfolio construction is to include several quality holdings that have good returns in and of themselves, but whose returns occur at different times. This approach provides a smoother ride. Two of the ways to reduce risk in the portfolio is to sell a portion of the stock funds when you believe markets will decline or use managers who will do this. I have found several unique funds which have enhanced the portfolio. For example, I have added the Stadion Fund (ETFFX). This fund will go to cash if their indicators point to a downturn. Another fund I use is the Gabelli ABC Advisor Fund (GADVX). The last time I checked he was 40% in cash. 

Some funds stay fully invested at all times and are perennial bulls. I prefer to use funds with independent-thinking managers who will make tactical moves if they believe it is necessary.

Another unique holding is the PIMCO Global Multi Asset fund (PGAPX). This fund can basically go long or short on most anything. Finally, I like the PIMCO Unconstrained Bond Fund (PUCPX). This bond fund may be all alone in terms of a category as it can go negative in its duration. 

There are more, but I have to keep some for another time. 

Have a great week!